Q. I have a limited company in the UK, which I am planning to liquidate. I am a UK tax resident, and I used up all my dividend and income tax allowance. To make things more complicated, I am moving to Poland, where I will become a tax resident as well (I am starting a full-time employment there). In Poland all dividends and capital gains are taxed at a flat 19% rate. What is the most tax-efficient way to liquidate the business in this case?
A. Firstly, it should be noted that the UK does have a double taxation treaty with Poland to prevent income from being taxed twice. If you remain resident in Poland for at least a full tax year, ie 06.04.16 – 05.04.17, then at the point you leave the UK the current tax year will be split into two, ie a resident and non-resident part. You will therefore only pay UK tax whilst you were resident here. It may therefore be more practical to wind up your company now. If there is less than £25,000 worth of assets in the company then this can be treated as a capital sum in your hands & subjected to capital gains tax. If Entrepreneurs Relief is available then you will only pay 10% CGT on the net gain (difference between what is left in the company and the amount you paid for your shares). If the company’s assets are valued at more than £25,000 and you still wish to have these taxed under the CGT regime, then the company will have to undergo a formal winding up. This normally means appointing an insolvency practitioner for which you would have to pay a fee.